Background: From independence in 1844 until 1961 the Dominican Republic was dominated by caudillos (“strongmen”), of whom Rafael Leonidas Trujillo (1930‑61) was the most powerful and influential. After a period of internal strife the country established a functioning democracy in 1978. In the mid-1980s it opted for a more open economic development strategy, centred on free-trade zones, tourism and remittances. With the exception of recession brought on by a banking crisis in 2004, this strategy has delivered high GDP growth rates, but social development and poverty reduction have lagged.

Political structure: The Dominican Republic is a representative democracy with a US-style Congress and presidency. The president has executive power, appoints a cabinet and holds office for periods of four years. Following a constitutional change approved in June 2015, consecutive presidential re-election is allowed for one additional term. Legislative power resides with a bicameral Congress, with both houses directly elected for periods of four years (the 2010 election was for an exceptional six-year term, in order to unify the congressional and presidential elections in 2016). The Senate (the upper house) has 32 members and the Chamber of Deputies (the lower house) has 190. The judicial system is composed of local justices, a Supreme Court, an Electoral Court and a Constitutional Court.

Policy issues: The president, Danilo Medina of the Partido de la Liberación Dominicana (PLD), began a second four-year term in August 2016. The PLD retains control of the legislature, which will facilitate the passage of reforms. The government’s agenda emphasises education reform, poverty alleviation, and support for farmers and small and medium-sized enterprises. Discussions on an “energy pact” to reform the energy sector will resume in 2017. Tax measures were introduced in 2016 to raise revenue, but more comprehensive fiscal reform is still lacking.

Taxation: A fiscal reform in 2013 included a rise in the value-added tax (VAT) rate—from 16% to 18%—as well as increases in excise and luxury taxes, and a cut in incentives for some productive sectors. Additional modest tax measures came into effect in January 2014 and January 2015. The highest tax rate is 25% for personal and corporate income. New measures to boost tax revenue will come into force in 2017, but current rates will not be increased.

Foreign trade: Goods exports—including from free-trade zones (FTZs)—totalled US$9.4bn in 2015, while imports, including FTZ imports, amounted to US$16.9bn. The current-account deficit stood at 1.9% of GDP. Goods from FTZs accounted for more than half of total exports. Gold is the largest single export item; fuel is the largest single import item.